Inside fDi: Why Brexit backers shouldn't ignore the FDI factor

As the UK prepares to vote on whether or not it wants to remain part of the EU, Courtney Fingar looks at the issue from a foreign investment angle and finds that the 'Brexit or bust' attitude may mean 'Brexit and bust' for some.

As the UK heads to the polls in late June to decide its future role within Europe, there is no shortage of international voices pleading with British voters to stay in the EU.

Everyone from US president Barack Obama to Pope Francis to movie star Matt Damon has waded into the debate on the side of the ‘Remain’ campaign, while the polls are showing late momentum in favour of leaving. This is not so surprising: appeals to UK voters from foreign dignitaries – to say nothing of Hollywood celebrities – inevitably fall on deaf ears and are if anything self-defeating. No longer wanting to be told what to do by outside forces is a strong impulse driving the Leave movement. These same voters also might not want to hear it from corporate titans, economists or others who they see as part of the ivory tower class.

Big business has left little doubt about where it stands on the issue, with a number of major foreign investor companies warning of the risks of losing preferential access to European markets. Survey after survey shows investors are jittery about the prospect of Brexit. Investor motive data from our fDi Markets service reveals that 60% of emerging market companies investing in the UK do so primarily as part of a regional European strategy. This has got to worry the UK’s investment promotion agencies.

But economic developers put equal focus these days on attracting and incubating start-up companies so it is worth considering also what the little guys have to say. While certainly some small companies and entrepreneurs say they welcome the idea of being free from Brussels-born red tape, others are in a panic. Freedom from the EU does not necessarily mean less, or better, regulation, and it can instead mean new barriers that could break small businesses.

I received an email recently from a young UK-based entrepreneur, Tom Cridland, who started his own fashion e-commerce business two years ago and now ships all over the world with many of his customers in the EU. “Being half-Portuguese, I was proud to partner with suppliers in Portugal and we now also have suppliers in Italy. The possibility of a Brexit resulting in trade restrictions or added financial costs would have a severe impact on growing my business. With only two full-time employees, additional regulations could be a logistical nightmare,” he wrote.

There are a lot of angles in the debate and a lot of big issues at play; some are emotional, some are political, some are philosophical. All of them matter. FDI is just one among many factors and will not, and perhaps should not, determine the outcome of the vote. Yet is not something to be ignored either.

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